Economic Growth Slows to 2 Percent on Slowdown in Consumer Spending and COVID-19 Impacts
The U.S. economy expanded at an annualized pace of 2 percent in the third quarter, a figure that is well below forecasts, driven down by a slowdown in consumer spending and a resurgence in COVID-19 cases that led to renewed restrictions and delays of reopening of businesses.
Data released on Oct. 28 by the Commerce Department show gross domestic product (GDP) rising by 2 percent in the third quarter, after growing 6.7 percent in the second quarter. Economists polled by Dow Jones expected third-quarter GDP to rise by 2.8 percent, with Oct. 28’s print coming as a downside surprise.
“Even so, that ‘disappointing’ reading is consistent with the U.S. long-term trend, likely only a fairly temporary speed bump caused by the global traffic jam of goods with which we’ve become all too familiar,” Bankrate senior economic analyst Mark Hamrick told The Epoch Times in an emailed statement.
The Commerce Department said the deceleration in output was driven chiefly by a slowdown in consumer spending, with much of the impact of fiscal stimulus waning in the third quarter, including from forgivable loans to businesses and direct payments to households.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 1.6 percent rate in the third quarter after a robust 12 percent pace of growth in the April–June quarter.
Another factor was a resurgence of COVID-19 cases in the third quarter, which led to renewed restrictions and delays in the reopening of businesses and other establishments across parts of the country, according to the Commerce Department.
Rep. Claudia Tenney (R-N.Y.), who serves on the House Small Business Committee, took to Twitter to comment on the lackluster GDP print.
“We’re now 0/3 in hitting our targets this year. More reckless spending and tax hikes won’t solve this crisis, they’ll make it even worse,” she wrote.
The Commerce Department’s GDP announcement included a note about inflation. The personal consumption expenditures (PCE) price index went up by an annualized 5.3 percent in the third quarter compared to 6.5 percent in the second quarter.
The so-called core PCE price index, which excludes the volatile categories of food and energy and is the Fed’s preferred inflation gauge, increased by an annualized rate of 4.5 percent in the third quarter, compared to 6.1 percent in the second quarter.
Further supply chain disruption, COVID-19 flare-ups, and central bank missteps are the top risks to the world economy in 2022, according to a Reuters poll of more than 100 economists, with a significant number of them predicting that sustained inflation is likely to dent the economic recovery.